Where Is This Latest JPMorgan Suit Headed?

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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As a sucker for lost causes, there are few things I would like better than to see the nonprofit advocacy group Better Markets succeed in getting a federal judge to overturn the Justice Department's not-really-$13 billion settlement last year with JPMorgan Chase & Co. But I know better than to get my hopes up about this much-publicized lawsuit's chances of winning.

In case you've forgotten, the Justice Department last November reached an out-of-court accord with JPMorgan after an investigation of the bank's mortgage-bond operations. The $13 billion figure included a $2 billion penalty secured by the Justice Department, along with amounts received by several state and federal agencies that had nothing to do with U.S. Attorney General Eric Holder's office.

The most distinctive feature of the settlement was the lack of any actual complaint by the Justice Department against JPMorgan. The Justice Department didn't even allege any violations of the law. So naturally, JPMorgan didn't admit any. The settlement papers included an 11-page statement of facts that was designed to obscure what really happened. As an exercise in law enforcement, it was a joke.

So this week Better Markets, led by former Senate staffer Dennis Kelleher, sued the Justice Department, seeking to overturn the settlement as unconstitutional, unlawful, arbitrary and capricious and so forth. (Disclosure: The group's complaint pointed to a Nov. 19 article that I wrote as an example of how even "sophisticated and informed observers" were misled by some of the language used in the government's settlement papers.)

Better Markets' criticisms of the deal are valid: The terms were worked out in secret. The agreement wasn't subject to court approval. The public was kept in the dark about the details of what JPMorgan did to deserve such penalties. Whatever those acts were, the bank won't be prosecuted for them now. The whole affair is quite maddening.

What I can't figure out after reading Better Markets' 60-page complaint is how Kelleher, a Harvard lawyer, and his colleagues expect to prevent this suit from getting quickly tossed out of court. It's far from clear that Better Markets has the prerequisite standing to sue. Lawsuits are supposed to be about real-life cases and controversies, not debating platforms for grievances about societal inequities. Likewise, to proceed with the suit, the group must show what the Supreme Court calls an "actual injury redressable by the court."

Better Markets tried its best to argue that it suffered such an injury. It said the Justice Department's violations of the law "have injured and continue to injure Better Markets by undermining its mission objectives; by interfering with its ability to pursue its advocacy activities; by forcing it to devote resources to counteracting the harmful effects of the DOJ's unlawful settlement process; by depriving Better Markets of the information to which it would have been entitled had the DOJ sought judicial review and approval of the $13 billion agreement; and by depriving Better Markets of a judicial forum in which it could seek to participate to influence the settlement process before the agreement becomes effective."

This looks like a stretch, to be charitable about it. If Better Markets' mission objectives were undermined, so were mine as an American citizen and journalist. So were those of every other American who dislikes these sorts of stinky sweetheart deals. Plus, the notion that Better Markets was forced to devote resources to counteract supposedly harmful effects is silly. Nobody forced it to do anything. Whatever resources it devoted it did so by choice.

Another part I don't get: When the government and an outside party reach a settlement without presenting it to a court for approval, what is the mechanism for getting it overturned later? Better Markets framed its lawsuit in terms of separation of powers. But to the best of my knowledge, one thing the judicial branch can't do is force the executive branch to sue a private party in a court of law. Unless the government files a case in court, there simply is no judicial review.

I don't like the terms of the Justice Department's deal with JPMorgan any more than Better Markets does. Fortunately, I'm not in the business of filing lawsuits over hopeless causes. I wish these crusaders the best of luck. They will need it.

(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Jonathan Weil at jweil16@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net